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Finishing Residency and planning for attending-hood

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  • Finishing Residency and planning for attending-hood

    Hi all,
    I've been following WCI for a while now but this is my first post. As I plan for that bump pay I have a couple questions that I was hoping to find answers to here. Some background. I'm finishing residency in EM next June, my fiancé is also finishing residency but will be doing a 2 year pem fellowship. I currently have a net worth of (-)270k (medical school debt), she has a net worth of (-)450k. Combined we are starting off ~800k in the hole. I want to start setting up retirement accounts and I'm considering a FA as I need/want the help at first but I also plan on paying off my loans in <3 years. For her we may consider PSLF and will be being IBR until she finishes fellowship at the very least.

    Should I start contributing to retirement accounts (20%) and then put the rest into loan repayment. Should I put it all into loan repayment? The way I see it we ill be making somewhere around 240k yearly over the next two years. Living like residents that leaves ~180k for loan repayment/retirement/investing. For time frame we are both 30yo.

    Ultimately my question is: should I hire an advisor to help with plan or put as much as possible into my load repayment and worry about investing and a solid plan once my loans are paid off? Thanks in advance for the advice.

  • #2
    I would probably start off by reading the WCI book or Bogleheads' Guide to Investing to help develop a foundation? You said you had $270k in debt and your fiance has $450k in debt but you list being $800k in debt combined. Where did the other $80k come from?

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    • #3
      does your residency have a retirement program? Are you participating? same for your fiancee. Is there a match? ideally you are already contributing something now to those retirement plans in a Roth 401k account even with that loan burden. If those aren't available to you, ideally you and your fiancess are doing Roth IRA contributions ($6k each)

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      • #4
        The 800k was an estimate as I didn't have the exact numbers on hand. She also has ~20k in credit card debt that is being paid off first. We are both contributing to our hospital 401k with a company match pretax. We do not have Roth IRA's set up at this time. Ultimately should I worry about paying student loans off or contributing to retirement?

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        • #5
          fill up your retirement buckets first then worry about paying off extra loans. I'm assuming your loans are going to be low interest so they shouldn't balloon out of control with you paying down the minimum. Any tax advantaged spaces you don't use, you lose forever.

          Once you fill up your retirement buckets, then the question becomes invest vs pay down loans.

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          • #6
            You want to first take advantage of any match that you get from your employer on retirement contributions. Then you want to have an emergency fund. Next look at the interest rates on all of your loans. If you have any high interest loans, you may want to take care of that next, either refinancing or paying down. And after that, you will want a balanced plan between paying down lower interest debt and investing for retirement. Try not to go crazy on taking on any more debt than absolutely needed. And try to live off your resident salary and don't buy using credit unless you absolutely have to. You have a very big debt load, but with two physician salaries and some strong financial discipline, you will be able to turn things around and get on track.

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            • #7
              Originally posted by White.Beard.Doc View Post
              You want to first take advantage of any match that you get from your employer on retirement contributions. Then you want to have an emergency fund. Next look at the interest rates on all of your loans. If you have any high interest loans, you may want to take care of that next, either refinancing or paying down. And after that, you will want a balanced plan between paying down lower interest debt and investing for retirement. Try not to go crazy on taking on any more debt than absolutely needed. And try to live off your resident salary and don't buy using credit unless you absolutely have to. You have a very big debt load, but with two physician salaries and some strong financial discipline, you will be able to turn things around and get on track.
              +1
              Are you planning to refinance your loans? Is PSLF not an option for you?
              You may need a student loan advisor more than a financial advisor / planner, if you need the latter at all.

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              • #8
                you actually should be paying off that CC debt before you pay down student loans or save up an emergency fund or save up for retirement beyond your employer match. That's an emergency right there and needs to get nipped in a bud and never done again

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                • #9
                  I get the credit card debt part and that is being corrected asap. As for me I will refinance after residency. Right now I'm on REPAYE and government is subsidizing 50% of the interest which leaves my interest at 2.5%. I plan on working community and PSLF isn't really the best option as I could pay off my loans in 2-3 years. I thought about a student loan advisor but I'm not really sure what they'd add.

                  I appreciate the advice though.

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                  • #10
                    Originally posted by vpanaitescudo View Post
                    Ultimately should I worry about paying student loans off or contributing to retirement?
                    Both.

                    You already plan to slay the credit card debt and not carry a balance going forward. Once you become an attending, save 20% or more of gross compensation towards retirement every year while paying off your student loans in five years or less. If your spouse goes for PSLF, set up a PSLF side fund to pay off her loans in case PSLF doesn’t work out for whatever reason.

                    The calendar year you graduate from residency, try to make the full 401(k) / 403(b) contribution as Roth. You’ll have a half year as a resident and a half year as an attending; your income and marginal tax rate won’t be that low for years to come.

                    Consider giving yourself a modest 20-50% pay raise from residency. You won’t pay off your debts quite as soon as you possibly could, but it’ll give you and your spouse some sense of progress. Plus you’ll be well ahead of the median American household for income. You still can get to a $0 net worth then pay off your debts in short order.

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                    • #11
                      You’re being significantly underpaid if in private practice. Like, easily 100k, maybe 200k underpaid. I’m in academics and make more than you, plus really great benefits. Are you in academics? Are you in NYC or SF or something? If so, do you have to stay?

                      Probably worth talking to someone who specializes in student loans. I doubt PSLF makes sense for you, but worth a couple hundred bucks to be sure. If not, refi into a 5y note asap. Also worth talking about DI with an independent agent. Probably not much utility in a financial advisor for you currently.

                      Keep your finances separate. Your significant other probably needs to look seriously at PSLF. Not your problem (other than for moral support) until the marriage license is signed.

                      Moonlight like crazy. Tithe if you are so inclined. Put 10k away for a rainy day. Pay off any consumer debt. Put 20% of your gross income into a total stock market fund or a target date retirement fund depending on your options and expense ratios. That’s 19.5 into a 403b/401k, 6k into a backdoor Roth IRA and 22.5k into taxable (unless you have an HSA and are healthy). Put every other free dime towards your loans. 20% to retirement, 20% to taxes (depending on state), 20% to living and 40% towards loans puts you at about 3y to debt free with a small ER and150k plus interest and matching in retirement. If you start seeing progress and up your income, could do 18 months.

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